Forex ebook Chapter 1 - What Is Forex All About

ONLINE FOREX TRADINGChapter 1:WHAT IS FOREXALL ABOUT? http://www.ForexCommune.comForex Commune Online Forex Trading Magazine

Online Forex Trading ForexCommune.comWHAT IS F OREX A LL ABOUT?Everything you need to know about the growing trade mechanism known as Forex.If you walk into a bar full of investment bankers they somewhat popular, but mostly among high rollers. In themight use the word “Forex” casually, as in “How’s your past decade, however, that has changed dramatically. AForex outlook?” They might also call this entity, officially market that was originally restricted to buyers with $10known as the foreign exchange market, by FX, Spot FX, to $50 million in purchasing power has opened up for theor the Currency Market. The name itself isn’t as common investor, thanks at least in part to the arrival ofimportant as what it means: unbridled opportunity. the Internet, which made trading much easier. The Forex market is, frankly, huge. We’re talkingIn the 1970’s, with the world currency market seemingly gigantic. In fact, it’s now the biggest financial market outspiraling out of control, President Nixon ended America’s there, with about $4 trillion moving around in dailyreliance on the gold standard. A move that would change volume. The most famous trading market in the world,the world’s financial picture forever, leaving the gold the New York Stock Exchange (NYSE), sees volume ofstandard took what was once a physical reality linked to around $25 billion each day, which is certainly nothing tothe value of a given currency and converted it into one scoff at, but it doesn’t even come close to equaling thebased on the abstract concept known as “faith” in the Forex market. It’s a lot bigger than just that too, becausegovernment. the Forex market is actually bigger than all the world’sThis didn’t immediately open up the foreign exchange stock exchange markets put together. That’s right, eachmarket to the public. In the 1990’s the market became and every one of them put together.© 2011 ForexCommune.com All rights reserved worldwide Page 2

Online Forex Trading ForexCommune.comWhile trading in the Forex market may seem a bit between the buy and sell quote. One major benefit ofesoteric, it’s actually a simple process. Each currency is trading in the Forex market rather than in the traditionalworth its exchange rate, so when you buy one currency stock market is that you’re charged only once, rather thanwith another, you’re betting that it will rise in value over three times, which is what happens in dealing with thetime. The difficult part is reading the market to know NYSE. Traditionally there is a broker, market maker, andwhen a currency will appreciate or depreciate. The real another broker to pay. That’s not the case with Forex,value is determined by the world’s collective confidence where you just have to pay the broker. This makes yourin each currency. That means trends; central bank initial foray a bit easier to stomach.decisions, consumer attitudes, and political stability aretaken into account. That also means a lot of gathering of It’s of the utmost importance that you find a legitimateinformation will need to be done in order to make a wise market maker, however. That’s probably obvious butdecision. certainly worth mentioning anyway. Some good options to check out are AvaFX.com, Askobid.com andWhile understanding the value of each currency requires Markets.com. It’s best that your market maker isa lot of work, actually trading in the Forex market does regulated by your country of residence. eToro.com hasnot. All you need to do to get started is open an account been especially noteworthy for its solid reputation, butwith a Forex Broker (they don’t actually receive a there are several good options to choose from. Make surecommission so the name is a bit of a misnomer), also you do your research and get comfortable with whicheverknown as a “market player”. These companies earn their option you choose.money by charging a small amount from the difference© 2011 ForexCommune.com All rights reserved worldwide Page 3

Online Forex Trading ForexCommune.comWhen you decide which market maker to go with, you location, such as Wall Street, and that adds morethen need to understand the manner in which currencies freedom. It’s like the NYSE versus NASDAQ, with theare traded. It’s pretty simple: 1 to 1. If you think the older, more traditional market having a physical place ofAmerican dollar is going to be more valuable in the business, while the younger market does not require one.coming months than the Egyptian pound, you trade This helps market makers lower overhead and makespounds for dollars. But, the Egyptian pound may be competing for your business what their businesses are alltrending up versus the Jordanian dinar, so decisions can about. That means you get better bang for your buck withbe made all around with different currencies. One Forex.currency will appreciate versus another, but depreciatewhen compared with a third, that’s how it works. Forex is a promising market to enter, just make sure you do your research before you get involvedOne major attraction the Forex market has to offer with the world’s biggest market.compared to more traditional stock markets is that it’sover the counter. That means that there’s no physical© 2011 ForexCommune.com All rights reserved worldwide Page 4

Forex ebook Chapter 1 - What Is Forex All About

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